European business looks to political leaders for encouragement

The 8th EU-China Business Summit to be held in Brussels on Sept 20 brings together European and Chinese leaders including the Chinese Premier Wen Jiabao, the European Commission President Jose Manuel Durao Barroso, the European Council President Herman Van Rompuy and CEOs from Europe and China.

Organized parallel to the political summit, the EU-China Business Summit serves as an important forum for an open discussion with European and Chinese leaders about the current and future challenges and opportunities that shape the business environment in China and the European Union. BusinessEurope, as the organizer of the business summit, hopes the event will provide an opportunity to expand business relations and the EU-China network with important counterparts from Chinese business and politics.

China's market reforms and impressive economic growth have been historic in their proportions. Over the past 15 years China has tripled its global export market share from about 5 percent to more than 16 percent. China's exports have risen more than five-fold over the past decade, to 1,172 billion euros ($1,528 billion) last year. Europe is the destination of about one quarter of all Chinese exports (290 billion euros last year). This spectacular export growth has clearly shaken up global competition. Chinese companies have become formidable competitors in many key industrial sectors.

Despite the competitive challenge, European companies have benefited from China's industrial development, and we remain convinced that EU companies will continue to benefit when the conditions are right.

No doubt, due to China's sheer size, its rise is having a huge impact on the global economy. Its strong export performance stands out as one of the main features of today's international trade. With the aftermath of the global economic crisis, enhancing business between China and the EU is an important way of accelerating global recovery. Over the next five years China is expected to be the largest contributor to global GDP. It is already the EU's second-largest trading partner after the US, and Europe's fastest growing export market. So it is no surprise that European companies are very keen on doing more business with and in China.

To do so partly depends on the level of competition they face in China. China has been able to expand its global market share in trade significantly, sometimes at the expense of EU companies. There are also challenges for European companies doing business in China. The legal and regulatory system often changes, creating some legal uncertainty. Public consultation on regulations could be more transparent to allow companies time to comment on the practical implications of the implementation of regulation for businesses. Recently, European companies have been concerned that market access restrictions in China are increasing. A policy of market closure could undermine one of the huge potential benefits of China's rise as a growing market for EU exporters. This is why we welcome the strong commitment of Premier Wen to keep the Chinese market open and to settle trade disputes rapidly through diplomatic channels and where necessary through appropriate legal channels such as the World Trade Organization.

At the same time, Chinese companies are increasingly present in the EU market, including procurement markets at highly competitive and sometimes unusually low prices. These companies are also pursuing a strategic policy to invest in EU companies with specialized industrial technologies. This will stimulate more competition at the high end of the industrial value chain in the future.

This growing interest in the European market from Chinese companies is positive, as it proves that Europe is an attractive and competitive investment destination. However, investments must always be made on fair terms and a level playing field. If companies are backed up by subsidy policies, competitors face unfair competition. In addition, while open flows of both inward and external investment are fundamental to the competitive performance of companies in Europe and of the European economy as a whole, European companies do not always receive a reciprocal level of openness on the Chinese market. Some sectors of the Chinese economy are still subject to investment restrictions, such as joint-venture or local-content/technology requirements. China must therefore open its market further to EU investors on a non-discriminatory basis.

European companies strongly support future EU-China negotiations on an ambitious bilateral investment agreement that would provide legal certainty for both sides and boost cross-border investment to create more jobs in the EU and in China. Provisions should be of the highest standard and include a broad definition of investment, covering all sectors of business. They should also guarantee the agreement's effectiveness, relevant enforcement mechanisms such as an investor-to-state dispute settlement system as well as a mediation mechanism for minor complaints. We hope that the political leaders at the EU-China summit in Brussels will deliver encouraging results in this respect.

In today's globalized world leading economies such as the EU and China have to set an example by respecting the rules and pushing forward multilateral trade negotiations. This of course also includes removing rules when they are not WTO-compatible, for instance in the areas of subsidies and export restrictions on raw materials. Business counts on leadership from both the EU and China to strive for a market-driven policy on access to raw materials, guaranteeing fair competition.

Moreover, they should join forces to move the Doha Round toward a successful conclusion, which should include ambitious sectoral agreements. The EU and China could get the ball rolling in Geneva by pressing the case for the rapid conclusion of a trade facilitation agreement covering improved customs procedures and guidelines. As leaders in the customs area, this would certainly generate positive momentum for the stalled Doha Round.

We also need to focus on the hugely positive elements of our relationship. In a recent analysis BusinessEurope urged the EU to build a mature relationship with China based on open and constructive engagement from both sides. These dialogues can be used effectively to deepen our economic cooperation and to foster mutual understanding between the people of the EU and China. A number of exciting new projects to strengthen our economic relations are within our grasp.

EU-Chinese cooperation projects to develop sustainable cities, to improve the management of water and to develop agriculture will create benefits for our citizens. In addition, these projects will provide opportunities for our companies to develop and to deploy new technologies in order to solve very serious societal challenges. We are convinced that this cooperation will prove beneficial for both our economies and for our societies.

At the global level, the EU and China also have a great new opportunity to coordinate more closely on major economic and societal challenges such as the ways to reduce macro-economic imbalances or to tackle climate change.

The EU, China and all other international actors need to rely on partnerships for growth. Partnerships can only work well if they are beneficial to all parties involved. A strong economic dialogue that removes trade and investment impediments is central to the EU-China relationship; so BusinessEurope is looking forward to the results of the summit with great expectations.

The author is president of BusinessEurope. The views do not necessarily reflect those of China Daily.

(China Daily 09/20/2012 page8)